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SALLIES LIMITED - REVIEWED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2003
Sallies Limited
(Incorporated in the Republic of South Africa)
Registration number 1903/001879/06
JSE Share Code: SAL
ISIN: ZAE000022588
REVIEWED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2003
PROGRESS ON THE ROAD TO RECOVERY
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended ended
31 Dec 03 31 Dec 02 Percentage 30 Jun 03
R000 Reviewed Reviewed Change Audited
Revenue -
mining 44 599 44 144 1 83 288
Cost of sales (52 304) (44 133) 19 (90 587)
(Loss)/profit
from mining
activities (7 705) 11 - (7 299)
Less:
Depreciation (1 214) (1 075) 13 (2 186)
Amortisation
of mineral
rights (1 038) (1 111) (7) (2 166)
Operating loss
from mining (9 957) (2 175) 358 (11 651)
Profit on
disposal of
assets 2 - - 46
Administrative
expenses (4 061) (5 396) (25) (9 102)
Investment
income 20 - - 372
Amortisation
of goodwill (332) (355) (6) (1 220)
Net finance
costs (965) (256) 277 (2006)
Net foreign
exchange
gains 3 400 524 549 5 204
Property,
plant and
equipment
written off - - - (2 463)
Net loss
before
taxation (11 893) (7 658) 55 (20 820)
Taxation 3 257 1 107 194 6 271
Net loss for
period (8 636) (6 551) 32 (14 549)
Issued shares
(000) 92 294 92 294 - 92 294
Weighted
average
shares
issued (000) 92 294 92 294 - 92 294
Weighted
average
shares
issued for
diluted
earnings
per share
(000) 92 294 99 133 (7) 92 294
Reconciliation
of earnings:
Net loss
attributable
to ordinary
shareholders
for basic
earnings per
share (8 636) (6 551) 32 (14 549)
Amortisation
of goodwill 332 355 (6) 1 220
Deferred tax on
business
combination (332) (355) (6) (690)
Gain on disposal
of assets
(net of tax) - - - (32)
Property, plant
and equipment
written off
(net of tax) - - - 1 724
Net loss
attributable
to ordinary
shareholders
for headline
earnings per
share (8 636) (6 551) 32 (12 327)
Add
- Armortisation
of mineral
rights 1 038 1 111 (7) 2 166
- preciation
(net of tax) 850 752 13 1 556
Adjusted cash
loss attributable
to ordinary
shareholders
for cash
earnings per
share (6 748) (4 688) 44 (8 605)
Loss per share
(cents)
Basic
- undiluted (9.4) (7.1) 32 (15.8)
- diluted (9.4) (6.6) 42 (15.8)
Headline
- undiluted (9.4) (7.1) 32 (13.4)
- diluted (9.4) (6.6) 42 (13.4)
Cash (loss)/
earnings
- undiluted (7.3) (5.1) 44 (9.3)
- diluted (7.3) (4.7) 55 (9.3)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Accum-
ulated
Share Share profit/
R000 capital premium (loss) Total
Balance at
30 June 2002 92 53 953 8 197 62 242
Net loss for
period - - (6 551) (6 551)
Balance at
31 December 2002 92 53 953 1 646 55 691
Net loss for
period - - (7 998) (7 998)
Balance at
30 June 2003 92 53 953 (6 352) 47 693
Net loss for
period - - (8 636) (8 636)
Balance at
31 December 2003 92 53 953 (14 988) 39 057
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2003 2002 2003
R000 Reviewed Reviewed Audited
Net cash inflows from
operating activities 3 239 5 641 1 969
Cash surplus generated
by operations 4 006 9 566 6 381
Net interest paid (965) (256) (2 006)
Taxation received/(paid) 178 (3 669) (2 778)
Net investment income 20 - 372
Net cash outflows from
investing activities (2 871) (6 008) (6 510)
Net additions to mine
plant, equipment
and buildings (2 871) (6 008) (6 645)
Proceeds from disposals
of plant and equipment - - 135
Net cash outflows/(inflows)
from financing activities (1 172) 4 622 2 807
Long term loans
- raised - 4 740 4 600
- repaid (1 172) (118) (1 793)
Net (decrease)/increase
in cash and cash
equivalents (804) 4 255 (1 734)
Cash and cash equivalents
at beginning of period (8 882) (6 574) 7 148
Cash and cash equivalents
at end of period (9 686) (2 319) (8 882)
CONSOLIDATED BALANCE SHEET
31 Dec 31 Dec 30 Jun
2003 2002 2003
R000 Reviewed Reviewed Audited
ASSETS
Non-current assets 67 086 70 860 66 520
Property, plant and
equipment 55 912 59 143 55 014
Goodwill 10 517 11 717 10 849
Accounts receivable 657 - 657
Current assets 24 405 30 160 36 232
Inventories 6 528 12 743 14 922
Accounts receivable 15 176 15 643 18 326
Taxation pre-paid 2 618 1 774 2 796
Cash and cash equivalents 83 - 188
Total assets 91 491 101 020 102 752
Net asset value per
share (cents) 42.3 60.3 51.7
EQUITY AND LIABILITIES
Capital and reserves 39 057 55 691 47 693
Share capital and
premium 54 045 54 045 54 045
Accumulated (loss)/
profit (14 988) 1 646 (6 352)
Non-current liabilities 7 573 17 614 12 817
Long-term loan - 3 266 2 492
Provision for environ-
mental rehabilitation 1 324 957 1 082
Deferred taxation 6 249 13 391 9 243
Current liabilities 44 861 27 715 42 242
Accounts payable 23 886 14 112 23 302
Bank overdraft 9 769 2 319 9 070
Current portion of long-
term liabilities 11 206 11 284 9 870
Total equity and
liabilities 91 491 101 020 102 752
COMMENTS
As anticipated, the company posted a loss at the interim stage. The interim
remedial measures which were implemented have, however, already started taking
effect while the successful fundraising exercise undertaken after the review
period will enable the company to complete its production expansion programme
and strengthen its balance sheet.
As a result of the operational improvement actions which have been initiated,
Sallies has met all its contractual obligations in terms of on-time and on-
specification shipments to customers since May 2003. The achievement of volume
and quality targets is attributable to the stabilisation of plant feed; the
restoration of power supply consistency; and a strong focus on maintenance which
has improved plant availability.
During the review period the mining operations at Witkop were fully insourced,
reducing mining costs substantially, and construction started on the expansion
of the milling circuit. In addition, three successful international marketing
tours were undertaken.
The Interim Results
While sales for the period increased by 37% in volume terms, revenue was static
as a result of an unfavourable movement in the rand/dollar exchange rate, which
averaged 7.07 in the six months to December 2003 against 10.03 for the
corresponding period in 2002. The increase in the cost of sales is due to the
rise in tonnages. Administrative expenses were pruned significantly and will
continue to reduce.
The substantial drop in inventories reflects the improved efficiency of the
metallurgical plant as well as the successful retreatment and sale of off-
specification materials which had been stockpiled. Considering that the company
invested R3.8 million in capital expenditure during the period, its cashflow was
satisfactory.
The Next Stage
Shareholders were advised at the year-end that while the interim recovery
measures would halt Sallies" decline, restoring the company to sustained
profitability would require a rights offer to fund an increase in production.
The fundraising exercise realised R36 million - R6 million above the target -
with additional shares having to be issued to meet investor demand. Of this
amount some R11 million is being used to increase the capacity of the
metallurgical plant and the rest is being applied to pay down debt.
The expansion of the milling circuit is due for completion in May this year and
the project is currently on time and on budget. It will increase Witkop"s
output from 110 000 tons per year to 180 000 tons. This increase is fully
supported by Witkop"s ore reserves and will be readily absorbed by the market.
Every ton that Sallies is capable of producing in 2004 has, in fact, already
been sold.
Prospects
The fluorspar price has improved significantly since 2002 in response to a sharp
reduction in exports from China, the world"s largest producer. Given these
currently favourable market conditions, the company"s full order book, its
return to operational efficiency and the beneficial effects expected from the
capital injection and the output increase, we are confident that the results for
the year to June will show continued progress on the road to recovery.
Dividend
The board has not considered a distribution to shareholders for the six months
to December 2003.
Accounting Policies
The company"s accounting policies conform to South African Statements of
Generally Accepted Accounting Practice. These policies are consistent with
those applied in the previous review period.
Restatement Of Comparatives
Comparative amounts have been restated where appropriate to facilitate improved
disclosure.
Review Opinion
The interim report for the period ended 31 December 2003 has been reviewed by
Ernst & Young and their unqualified review report is available for inspection at
the registered office of the company.
Diluted Earnings Per Share
Diluted earnings per share have been calculated assuming that at the beginning
of the period nil (2002 - 6 839 000) share options, allocated to directors,
employees and consultants, were exercised. The net loss is adjusted by the tax
effect of the interest earned on the additional capital from the exercise of the
share options
On behalf of the Board
PH Flack
Chairman
17 March 2004
Johannesburg
Directors:
PH Flack (Chairman), LB Robertson*, AD Moffat, JJ Geldenhuys, IJ Marais*
(*Executive)
Registered office:
Farm Wintershoek,
Zeerust, 2865
(Private Bag X1315, Zeerust, 2865)
Transfer secretaries:
Computershare Limited,
70 Marshall Street,
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Investor and media relations:
For further information contact
Kathy du Plessis on
Telephone +27 (11) 728 4701,
Telefax +27 (11) 728 2547,
E-mail: sallies@dpapr.com
Date: 17/03/2004 10:01:23 AM Produced by the JSE SENS Department
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